Survey: Chinese firms lower profit reinvestments in U.S. operations, despite revenue growth

Digital Originals

Chinese companies become more cautious to reinvest their U.S. profits in the local businesses in 2021, although they have seen revenue growth and profitability improvement in the U.S. from last two years, according to an annual business survey by the China General Chamber of Commerce -USA (CGCC).

The survey of 111 companies across 11 industry sectors in March and April 2022 showed that more than half of respondents in 2021 reported revenue growth, up from 20 percent in 2020 and 39 percent in 2019.  

Source: CGCC 2022 Annual Business Survey Report on Chinese Enterprises in the U.S.

The mounting uncertainties in the U.S. investment environment have changed business strategies of some Chinese companies. 

The report showed that 74 percent of respondents reinvested the majority of their U.S. profits in the U.S. operations in 2021, down from 90 percent in 2020 and 79 percent in 2019. 

Source: CGCC 2022 Annual Business Survey Report on Chinese Enterprises in the U.S.

Moreover, 29 percent of respondents said the U.S. investment and business environment has “moderately or substantially improved” in 2021, a huge increase from the 6 percent in 2020. 

Meanwhile, 24 percent of respondents made new investments in the U.S. in 2021, double from the prior year. Energy, materials, financials and IT companies indicated the highest level of satisfaction and expansion.

This year’s report also featured the challenges Chinese investors faced in compliance with U.S. laws and regulations. The complexity of the U.S. laws and regulations and potential conflicts of rules between the U.S. and China are the top challenges for Chinese companies operating in the U.S. 

Source: CGCC 2022 Annual Business Survey Report on Chinese Enterprises in the U.S. 

The ongoing trade tension between China and the U.S. has also cast shadow over the business operations of Chinese companies in the U.S., as they build up brands and trust in a difficult political environment.

Only 10 percent of respondents see China-U.S. relations improving in the next year, the lowest since 2018.

Source: CGCC 2022 Annual Business Survey Report on Chinese Enterprises in the U.S.

“The economic structures of China and the U.S. are highly complementary and bilateral economic and trade cooperation is win-win in nature,” Xu Xueyuan, Deputy Chief of Mission and Minister at the embassy of the People’s Republic of China in the U.S. said at the report launch event. “Going forward, it is hoped that the U.S. will meet China in the halfway. Cut tariffs instead of imposing additional tariffs, open up their markets instead of decoupling and building wars and barriers… so as to create a vibrant investment environment where Chinese companies can prosper,” she added.

CGTN spoke to the CGCC Chairman Hu Wei about the key messages coming out of this year’s survey report and the roles of the CGCC and Chinese investors in the U.S. in enhancing the trade and economic ties between China and the U.S.